South Africa's rand set for weekly gains, stocks flat

JOHANNESBURG: South Africa's rand retreated from a five-month high on Friday as risk appetite subdued, but was on track for weekly gains after expectations the US Federal Reserve would cut interest rates had stoked demand for the currency.

On the bourse, stocks were flat as worries over global economic growth and US-China trade quelled investor appetite for emerging market equities after an earlier rally fuelled by hopes of looser U.S monetary policy.

At 1520 GMT, the rand was 0.25% weaker at 14.0050 per dollar, retreating from a five-month high of 13.8200 reached earlier in the session. The currency was on track for weekly gains of more than 1%.

Also helping the currency in the week were media reports on Thursday that state asset manager Public Investment Corporation (PIC) might consider converting the $6.4 billion debt of struggling state power utility Eskom to equity.

Market focus is now on the South African Reserve Bank's monetary policy committee (MPC) interest rates announcement on Thursday.

"The MPC is also highly likely to reduce local interest rates during its meeting next week, but the impact on the rand will probably be overshadowed by the positive effect of the expected Fed rate cut, and the expected benefits to the South African economy," said Bianca Botes, a treasury partner at Peregrine Treasury Solutions.

"The local economy, however, will require more than an interest rate cut to see any significant and sustainable growth."

In equities, the benchmark Johannesburg Stock Exchange Top-40 Index fell slightly by 0.06% to 51,157.41 points while the broader All-Share Index dipped by 0.05% to 57,243.86 points.

"We're seeing risk-off trade in emerging markets coming through towards the end of the week based on possible Fed outcomes, the ongoing trade war, and the US and China not coming to the party and saying or commenting on further agreements," said Wilmar Buys, FFO Securities portfolio manager.

The bottom performers were mining company Gold Fields , which slipped 2.97% to 72.20 rand, and paper and pulp maker Sappi, which dropped 2.24% to 49.80 rand.

Crisis-hit retailer Steinhoff, however, rose 12.60% to 1.47 rand despite reporting a 356 million euro ($401 million) half-year loss from continuing operations as the damage from a massive accounting scandal drags on.

Bonds retreated, with the yield on the benchmark 2026 issue rising by 6 basis points to 8.09%.